I want to Buy Shares.

Seaniemac · 27-05-2014 8:41pm #1

Hi, I have €5,000 and I would like to buy some shares in something just to see if I could make a few bob. I have never had a share in anything and I haven`t a clue as to how to buy a share or sell one. I would like to do all of this Online and it was said to me that maybe I should look at the American or British markets. I would really appreciate some advice and direction on this.

househero · 28-05-2014 6:02am

Seaniemac wrote: »

Hi, I have €5,000 and I would like to buy some shares in something just to see if I could make a few bob. I have never had a share in anything and I haven`t a clue as to how to buy a share or sell one. I would like to do all of this Online and it was said to me that maybe I should look at the American or British markets. I would really appreciate some advice and direction on this.

My advice to you.

Is don't do it.

You have no idea. Go do some research for 3 years. Play with fake money on a real stock exchange (most big sites have these fantasy portfolios) then you Will a. Realise the market is not great for beginners right now. B. Easy to loose money. C. Hard to make it.

Recondite49 · 29-05-2014 4:39pm

Seaniemac wrote: »

Hi, I have €5,000 and I would like to buy some shares in something just to see if I could make a few bob. I have never had a share in anything and I haven`t a clue as to how to buy a share or sell one. I would like to do all of this Online and it was said to me that maybe I should look at the American or British markets. I would really appreciate some advice and direction on this.

Hi buddy,

When I wanted to get started I visited the Investopedia website which has some great intros and an imaginary stock market simulator which I found really useful.

If you want to learn a little more about Financial Theory in general, MIT Openware does a great free course using video lectures, which I'm taking at the moment, it's really useful when it comes to learning about stocks, bonds, equities etc. That way you can learn about different investment instruments and see what works for you. For instance you might want to buy government bonds which are very safe but don't offer a very high rate of return.

A couple of books I really enjoyed too were, "Rich Dad, Poor Dad" (more to do with becoming financially independent in general terms, "A random walk down Wall Street" and "Beating the Street" by Peter Lynch.

Probably the best way to learn though is to try joining an investment club if there's one in your area (or start your own!) that way you can learn from each other and also save on commission when buying shares through doing it together.

Naturally if you have any further questions feel free to come on here. Best of luck with your investment.

Voltex · 31-05-2014 11:41pm

OP..try out virtual trading platforms first. Bullbearings.co.uk is pretty good.

tennisfennis · 08-08-2014 2:09am

househero wrote: »

My advice to you.

Is don't do it.

You have no idea. Go do some research for 3 years. Play with fake money on a real stock exchange (most big sites have these fantasy portfolios) then you Will a. Realise the market is not great for beginners right now. B. Easy to loose money. C. Hard to make it.

This is the BEST FREE advice you can hope to ever get. Please follow it

househero · 08-08-2014 3:00pm

tennisfennis wrote: »

This is the BEST FREE advice you can hope to ever get. Please follow it

& I hope he did. DOW down nearly 5% in 3 weeks and looking unhealthy going in to the summer lull. Would have been a great way to watch the market falling (with imaginary money). Instead of loosing his hard earned money to a frothy market.

Seaniemac · 10-08-2014 8:12pm

I took all the Advice and I didn`t buy. I think I might drink it instead ;-)

userod · 10-08-2014 8:14pm

Amazing noone here can ever give a straight answer on how to buy a few shares. Are ye all a little lost or what?

Sonnenblumen · 10-08-2014 8:21pm

userod wrote: »

Amazing noone here can ever give a straight answer on how to buy a few shares. Are ye all a little lost or what?

You have the stage, let's hear it from you or do you also have Kindergarten Q's?

Seaniemac · 10-08-2014 8:31pm

Sonnenblumen wrote: »

You have the stage, let's hear it from you or do you also have Kindergarten Q's?

I wouldn`t consider my question a "Kindergarten Q" as you put it. If you haven`t anything civil to say, don`t say anything at all.....

tommylimerick · 11-08-2014 9:00am

the first share I bought instead of going drinking or buying a car turned into a five bagger
it could have gone higher but the shareholders ****eed it up
I say op you are young and can ttake more risks than a pensioner might
that is why a pensioner would have a lot more of their money in bonds than shares
so you should go high risk in a technology company or something that takes your eye in the next couple of months
I invest in companies sometimes where I have had a good experience or new product

Recondite49 · 11-08-2014 11:27am

Seaniemac wrote: »

I wouldn`t consider my question a "Kindergarten Q" as you put it. If you haven`t anything civil to say, don`t say anything at all.....

Hi Seanie,

I've started a suggested "Broker Review" thread here in the Investment and Markets forums. I haven't posted in a while as I've only just set up an account with the Belgian bank Keytrade and am still waiting to hear from TD Direct Investing who apparently mistakenly refused my application and are happy to let me open an account.

I think the main difficulty for anyone getting started are that you need to have an understanding of basic financial theory to have an appreciation of risk and you need to get some money together to invest in the first place - naturally you've taken care of the latter of the two!

As I'm sure you already know, the level of return on investment is usually commensurate with the level of risk.

If you're still in your twenties like me (barely! :-D) then I would suggest putting 20% into bonds and 80% into shares. Personally I split my money equally between Vanguard index funds - you can google these if you like.

In a nutshell, Vanguard operates on a not for profit basis and therefore the cost to you of buying shares in one of their ETF's are fairly minimal. They do have ones which follow government bonds which of course are safe, given that the government can simply print more money or raise taxes to pay them off rather than default.

This is a mechanical and fairly boring way to invest but if you do have a read of 'A random walk down Wall Street' you'll see that investing in a broad index fund over the years has proven a far better return on your investment than sinking your money into this or that mutual fund.

Naturally, this is a way of growing your wealth in the long term but if like me you want to retire at 60, you do have some time on your hands to play around with.

If you do ever change your mind and want to open a brokerage account, feel free to have a look on the forums or send me a message.

Sonnenblumen · 11-08-2014 6:24pm

Seaniemac wrote: »

I wouldn`t consider my question a "Kindergarten Q" as you put it. If you haven`t anything civil to say, don`t say anything at all.....

I was actually quite civil, I probably just have a low tolerance of piss artists, tyre kickers etc

sugar_lover · 11-08-2014 10:27pm

Seaniemac wrote: »

Hi, I have €5,000 and I would like to buy some shares in something just to see if I could make a few bob. I have never had a share in anything and I haven`t a clue as to how to buy a share or sell one. I would like to do all of this Online and it was said to me that maybe I should look at the American or British markets. I would really appreciate some advice and direction on this.

if i were you i would buy an index fund , look up this one

VEUR , its an index which covers europe , european stocks are better value than american ones right now

dRNk SAnTA · 12-08-2014 4:40pm

Listen - not that I'm disagreeing with anything that's been said on here, but please don't take your investment advice from people on forums talking about value. Do your own research and come to your own conclusions.

When I started out I didn't have a clue either, and the reason people like us have a hard time figuring it out is because it's obviously so difficult to get a straight answer - look at this thread - someone asks "how do I buy shares", and it's 12 posts before the word "stockbroker" is mentioned.

To ANSWER your question -

You'll need a stockbroker to purchase shares or ETFs. These come in many forms - the large banks, well known brokerages such as Goodbody's, Davy's etc, or online ones. They have a range of different costs and service offerings - cheap online brokers are purely "transactional" - i.e. they'll give you no advice on what to do, whereas "goldplated", "bricks & mortar" stockbrokers will offer guidance (often at a hefty cost).

Most cheap online brokers (e.g. based in UK/Europe/US) don't allow Irish customers, so the choice is relatively few and there are many threads on here debating the merits of each.

Not all stockbrokers offers access to every stock/fund/exchange, so check that the stock you wish to buy is actually available before signing up.

The next thing to be aware of is currency - you have euros, but US stocks are bought in dollars, UK stocks in sterling, etc. Stockbrokers will change your currency for you - but for a fee. You are best off planning and managing this yourself.

We are all investing/trading because we want to make money so my main advice would be - watch your costs. These can easily eat up profit (if there is any!) and make all of your efforts a waste of time.

Investopedia is a great resource, as others have said. I also read "monevator" and "bogleheads" as they fit with my personal strategy.

Other than that - be careful and god speed!

topper_harley2 · 12-08-2014 8:10pm

Recondite49 wrote: »

Hi Seanie,

If you're still in your twenties like me (barely! :-D) then I would suggest putting 20% into bonds and 80% into shares. Personally I split my money equally between Vanguard index funds - you can google these if you like.

In a nutshell, Vanguard operates on a not for profit basis and therefore the cost to you of buying shares in one of their ETF's are fairly minimal. They do have ones which follow government bonds which of course are safe, given that the government can simply print more money or raise taxes to pay them off rather than default.
.

I've been looking to try and get into the Vanguard index funds, due to them having traditionally low fees, VOO or VUSA i.e. S+P 500 trackers. Am I right in saying you cant actually buy them directly from VG, you need to buy them from broker, say TD Waterhouse online? What platform would you recommend for buy and hold investment in index funds, in order to minimise transaction costs?

Thanks

robp · 12-08-2014 8:33pm

topper_harley2 wrote: »

I've been looking to try and get into the Vanguard index funds, due to them having traditionally low fees, VOO or VUSA i.e. S+P 500 trackers. Am I right in saying you cant actually buy them directly from VG, you need to buy them from broker, say TD Waterhouse online? What platform would you recommend for buy and hold investment in index funds, in order to minimise transaction costs?

Thanks

Buy and hold people often prefer to reinvest ETF dividends but Vanguard funds do no reinvest dividends. For this you need alternatives like iShares. Fees are coming down in Europe but still they are much higher then the US.

topper_harley2 · 12-08-2014 8:49pm

Aw, that's a pain alright re: dividend!

Looking at http://www.ishares.com/global/, Ireland isn't listed as a local site.........can we still buy iShares ETFs via an online broker?

robp · 12-08-2014 9:10pm

topper_harley2 wrote: »

Aw, that's a pain alright re: dividend!

Looking at http://www.ishares.com/global/, Ireland isn't listed as a local site.........can we still buy iShares ETFs via an online broker?

I am a complete beginner at this too but I have just opened a TD account and I am pretty sure that using TD you can purchase the S&P 500 with the ETF iShares Core S&P 500 UCITS ETF (CSPX). However only when traded on the London Stock Exchange. I don't know if that is an issue or not.

Recondite49 · 12-08-2014 9:56pm

topper_harley2 wrote: »

I've been looking to try and get into the Vanguard index funds, due to them having traditionally low fees, VOO or VUSA i.e. S+P 500 trackers. Am I right in saying you cant actually buy them directly from VG, you need to buy them from broker, say TD Waterhouse online? What platform would you recommend for buy and hold investment in index funds, in order to minimise transaction costs?

Thanks

Hi Topper,

God bless you son, pleased to know there are some investors out there with the sense to let their wealth grow steadily.

I have to be frank and say I'm still dealing with opening my account with TD - However from looking at their website's trading platform it would seem that it is possible to buy into Vanguard ETF such as VUSA - however only those traded on the London Stock Exchange.

This isn't the end of the world but it does mean you'll have to pay 2% commission each time you want to convert your Euros to Sterling. Of course a conservative investor might favour the pound over the Euro but let's not get into that now.

I have opened an account with the Belgian bank Keytrade and so far couldn't be happier. In exchange for a mere photocopy of my passport and bank statement I have a fully fledged current account along with one of those two factor key fob things (I've always wanted one of those!).

They also provide you with a trading account. I've examined their trading platform and you can buy into all the Euro denominated Vanguard funds listed on the Amsterdam Stock exchange - the ones I would keep an eye on are VUSA and VWRL (the latter representing the rest of the world's stock markets. There are no Vanguard government bond ETF's there but iShares do have them, I forget the exact Ticker symbol but can dig this out for you if you'd like.

What I like about Keytrade is the fact they don't charge any annual maintenance fees for you to hold shares, plus their commission on trades is a very reasonable EUR 14.95 - that said I think it's best we all compare our experiences with respective brokers as there are no doubt advantages and disadvantages to each.

topper_harley2 · 12-08-2014 11:48pm

Great reply! Keytrade does sound good from your reply, especially the no annual fees to hold shares, compared to €15 at TD. Keytrade are part owned by Credit Agricole, a large French bank, it seems.

I guess most/all of these online brokers hold the shares in nominee accounts. This is another consideration, based on the W&R Morrogh case a few years ago in Cork. I guess the only 100% safe method is holding share certs yourself.

Do Rabo offer any ETFs? I know they offer managed funds, which they seem to be pushing via the regular investment approach. IMO you'l get killed by charges on this though.

robp · 13-08-2014 12:04am

Recondite49 wrote: »

Hi Topper,

God bless you son, pleased to know there are some investors out there with the sense to let their wealth grow steadily.

I have to be frank and say I'm still dealing with opening my account with TD - However from looking at their website's trading platform it would seem that it is possible to buy into Vanguard ETF such as VUSA - however only those traded on the London Stock Exchange.

This isn't the end of the world but it does mean you'll have to pay 2% commission each time you want to convert your Euros to Sterling.

This can be reduced quite a lot by thriftiness. With a website like TransferWise it will only cost you 0.5% to convert currency. Also, just because something is traded on the London Stock exchange doesn't mean it is automatically traded in Sterling. That been said I have not found any promising ETFs tracking the S&P 500 in Euros on the London tock Exchange. The one I mentioned earlier is in dollars. However you can get low fee ETFs tracking Eurozone stocks on the London Stock Exchange in Euro.

Recondite49 · 13-08-2014 7:59am

robp wrote: »

This can be reduced quite a lot by thriftiness. With a website like TransferWise it will only cost you 0.5% to convert currency. Also, just because something is traded on the London Stock exchange doesn't mean it is automatically traded in Sterling. That been said I have not found any promising ETFs tracking the S&P 500 in Euros on the London tock Exchange. The one I mentioned earlier is in dollars. However you can get low fee ETFs tracking Eurozone stocks on the London Stock Exchange in Euro.

Hi Rob,

Thanks for your post.

I hadn't heard of transfer wise before but they seem ideal for sending money abroad. If your broker accepts third party transfers into your account (as naturally it won't be in your own name) and they have a Sterling denominated account you'll be quids in.

As T D are British I certainly don't think it would be a problem to wire them pounds.
That said, do you think it just might be deferring the foreign exchange costs for when you cash out your shares? Then again maybe Transferwise will be able to help then as well?

I take your point about Euro dominated stocks on the London Stock Exchange. All I can talk about are the Vanguard funds I found on TD's website which were all in Sterling.

I don't mean to put anyone off as a long term investor might well want to place their trust in the stability of the pound over the Euro in any case.

Hoping to make my first purchase with Keytrade at end of month but will also open an account with TD just because.

Will let you all know how it goes.

rekhib · 13-08-2014 8:31am

Just a few tips for the OP.

- Generally, avoid buying US based ETFs/funds. Only reason to do so is if you can't get it anywhere else or if the bid/ask spread is too large anywhere else. You'll get hit with a 30/15% withholding tax and they won't reinvest your dividends. E.g. VOO tracks S&P 500 and while it's huge and liquid, you can find UK based equivalents that will 1) do the same job 2) reinvest your dividends and 3) be available in currencies other than USD.

- You can buy direct from Vanguard if you have £100k/$100k but otherwise you gotta use a broker like TD.

- Vanguard do reinvest dividends in some cases. Not reinvesting dividends is a feature of the US, not Vanguard. E.g. Vanguard UK's mutual funds (index trackers) are capitalising - need an overseas resident account from TD UK to buy them.

- You can buy iShares ETFs US or UK based from TD Ireland - usually 2 versions on London, local currency (GBP) or base currency (USD) - try buy base currency if possible otherwise you'll be subject to uncontrolled currency risk.

- Avoid transferring EUR into your brokerage a/c and using their FX service - send an FX transfer from your bank to their GBP/USD accounts - it'll save you a small fortune.

Hope they're of some use.

Recondite49 · 13-08-2014 12:32pm

Further to my previous post:

As mentioned before I think it's a good idea to invest a proportion of your portfolio in government bonds, depending on your age. (The idea being to move from less risky investments with higher potential return to safer investments as time goes on.)

I can't say which is the best but currently I have my eye on an iShares ETF which tracks 5-7 Year European Government Bonds (mostly French and German).

Vanguard also have a GBP denominated Exchange Traded Fund which deals exclusively in UK Government bonds.

These are very boring but also very low risk, as there's no reason for the government in question to default on its debts when they control the machines which print more money. Of course the safety means also only a fairly minimal return on your investment and there's no guarantee you'll even beat inflation.

If you're starting out I'd suggest putting 10% of your portfolio into Government Bonds and the other 90% into an Exchange Traded fund either tracking developed European Countries or America's S&P 500.

tommylimerick · 13-08-2014 10:06pm

yes but in Ireland we do not control our printing presses yet we guarantee bonds of irish banks
with most bonds you will find it hard to beat inflation

Recondite49 · 14-08-2014 7:08am

tommylimerick wrote: »

yes but in Ireland we do not control our printing presses yet we guarantee bonds of irish banks
with most bonds you will find it hard to beat inflation

One of the prices we pay for being part of the Eurozone sadly!! However, the government can also issue more bonds or raise taxes to avoid defaulting too.

As I understand it this so-called Universal Social Charge was levied to bail the banks out - such a shame to see good money going after bad.

At the moment I am planning to put 20% of my portfolio into bonds but as we discussed above as time goes on, we all become more risk averse so it's best to have government bonds form a greater part of your investments as time goes on.

FURET · 14-08-2014 7:26am

The OP should buy broad-based ETFs - but only if he intends to hold them for a long period and can get around to seeing a rising market as a bad thing and a falling market as a good thing for the long-term investor.

He should also read some basic but essential books - The Intelligent Investor being the most important.

For someone aged 30, an allocation as follows might make sense:

30% short term government bond ETF
35% S&P 500
35% Developed Europe or World stock market ex-US

Non-Americans should avoud buying off US-based exchanges due to the US death tax.

Recondite49 · 14-08-2014 2:42pm

FURET wrote: »

The OP should buy broad-based ETFs - but only if he intends to hold them for a long period and can get around to seeing a rising market as a bad thing and a falling market as a good thing for the long-term investor.

He should also read some basic but essential books - The Intelligent Investor being the most important.

For someone aged 30, an allocation as follows might make sense:

30% short term government bond ETF
35% S&P 500
35% Developed Europe or World stock market ex-US

Non-Americans should avoud buying off US-based exchanges due to the US death tax.

From your lips to God's ears FURET, nice to see someone giving sound investment advice!

dRNk SAnTA · 14-08-2014 3:34pm

Out of interest, has anyone looked into.

- Vanguard FTSE Emerging Markets UCITS ETF - VFEM
Primarily invested in China, Taiwan, Brazil, India, South Africa, Russia stocks.

I'm considering adding a riskier ETF to my portfolio. Also, if anyone can recommend a similar capitalizing/accumulating ETF, I'd be very interested to hear about it.

rekhib · 14-08-2014 5:29pm

dRNk SAnTA wrote: »

Out of interest, has anyone looked into.

- Vanguard FTSE Emerging Markets UCITS ETF - VFEM
Primarily invested in China, Taiwan, Brazil, India, South Africa, Russia stocks.

I'm considering adding a riskier ETF to my portfolio. Also, if anyone can recommend a similar capitalizing/accumulating ETF, I'd be very interested to hear about it.

What about SPDR's SPYM (large-cap) or SPYX (small-cap) emerging markets. Both can be purchased on LSE in either GBP or USD and they're capitalising.

Recondite49 · 14-08-2014 5:53pm

rekhib wrote: »

What about SPDR's SPYM (large-cap) or SPYX (small-cap) emerging markets. Both can be purchased on LSE in either GBP or USD and they're capitalising.

+1

dRNk SAnTA · 15-08-2014 5:04pm

rekhib wrote: »

What about SPDR's SPYM (large-cap) or SPYX (small-cap) emerging markets. Both can be purchased on LSE in either GBP or USD and they're capitalising.

Great suggestions - thanks for those!

FURET · 25-08-2014 8:38pm

Recondite49 wrote: »

They also provide you with a trading account. I've examined their trading platform and you can buy into all the Euro denominated Vanguard funds listed on the Amsterdam Stock exchange - the ones I would keep an eye on are VUSA and VWRL (the latter representing the rest of the world's stock markets. There are no Vanguard government bond ETF's there but iShares do have them, I forget the exact Ticker symbol but can dig this out for you if you'd like.

I'm thinking of buying VWRL myself. It actually does contain American companies, so if you buy both VUSA and VWRL you're repeating. For this reason I'm probably going to buy only one stock ETF (VWRL) in euros from Amsterdam.

What I like about Keytrade is the fact they don't charge any annual maintenance fees for you to hold shares, plus their commission on trades is a very reasonable EUR 14.95 - that said I think it's best we all compare our experiences with respective brokers as there are no doubt advantages and disadvantages to each.

It'd be great if you could do a review of this broker. I'm curious about how they compare with Saxo...

Recondite49 · 26-08-2014 5:26pm

FURET wrote: »

I'm thinking of buying VWRL myself. It actually does contain American companies, so if you buy both VUSA and VWRL you're repeating. For this reason I'm probably going to buy only one stock ETF (VWRL) in euros from Amsterdam.

It'd be great if you could do a review of this broker. I'm curious about how they compare with Saxo...

Hi Furet,

You beat me to the punch re: VWRL as I have decided to switch to VEUR - of course many US companies have European branches which will form part of the European FTSE index but it's sufficiently diverse for my addled brain.

I think you are better off with Saxo, however isn't their initial deposit requirement something in the order of ten grand isn't it? Too much for my fractured finances.

I have nothing but good things to say about Keytrade so far, will post more on the review thread, also am buying my first batch of shares with them next month.

FURET · 26-08-2014 5:34pm

Recondite49 wrote: »

Hi Furet,

You beat me to the punch re: VWRL as I have decided to switch to VEUR - of course many US companies have European branches which will form part of the European FTSE index but it's sufficiently diverse for my addled brain.

Fair enough. I think VWRL has a wonderful mix of businesses from Europe, the US, Australia, SE Asia, S America, the Middle East, China, Japan, and India. You can see a complete list of the companies it buys and their countries in this 2013 annual report (the 2014 report is being prepared now; and btw, the 2013 annual report for VEUR is in the same document.).

My concern is that its base currency is dollar even if you buy it in euros. It doesn't track its American equivalent (VT) exactly and Vanguard Netherlands will not give any explanation. In fact, after calling them today, they refused to comment and said to seek advice from an adviser. I will in my hat.

My other concern is that ETFs whose base currency is dollar issue dollar-denominated dividends, which will be subject to a currency conversion fee if your base brokerage account is euro.

I think you are better off with Saxo, however isn't their initial deposit requirement something in the order of ten grand isn't it? Too much for my fractured finances.

I have nothing but good things to say about Keytrade so far, will post more on the review thread, also am buying my first batch of shares with them next month.

Great, I'll quiz you about them on that thread!

Electric Boobs · 26-08-2014 7:23pm

Seaniemac wrote: »

Hi, I have €5,000 and I would like to buy some shares in something just to see if I could make a few bob. I have never had a share in anything and I haven`t a clue as to how to buy a share or sell one. I would like to do all of this Online and it was said to me that maybe I should look at the American or British markets. I would really appreciate some advice and direction on this.

How old would you be?

Yeah, if you're not that experienced yet, then I'd just stick to the Irish market. Something like Kerry Group, you can't go wrong with. But don't expect to make a lot out of it. Or if you want to be a little bit more bold, try Ryanair!

Electric Boobs · 26-08-2014 7:27pm

Seaniemac wrote: »

If you haven`t anything civil to say, don`t say anything at all.....

My mom says that to me about 5 times a day

FURET · 26-08-2014 9:34pm

Electric Boobs wrote: »

How old would you be?

Yeah, if you're not that experienced yet, then I'd just stick to the Irish market. Something like Kerry Group, you can't go wrong with. But don't expect to make a lot out of it. Or if you want to be a little bit more bold, try Ryanair!

At a technical level, why are you recommending these shares?

Recondite49 · 27-08-2014 10:20am

FURET wrote: »

At a technical level, why are you recommending these shares?

Thanks for raising this Furet, I was wondering this myself! My own company pension plan is balls deep into the Irish economy and it's making me lose sleep! :-D

FURET · 27-08-2014 10:53am

Recondite49 wrote: »

Thanks for raising this Furet, I was wondering this myself! My own company pension plan is balls deep into the Irish economy and it's making me lose sleep! :-D

Well, with regard to Kerry Group and Ryanair, why does Electric Boobs feel that they are a good investment? Has s/he studied their balance sheets, PE ratios, price to book ratios? What are the earnings per share over the past five years? Is the business currently overpriced on the market or underpriced? Is he in it for the long haul or to make a quick buck?

The unwritten rule when buying stock is that you ask yourself the question: "Would I be happy to buy the entire business for this price?"

So if for example a Kerry Group share costs 1 euro and there are a total of 3 billion shares, would you be happy to pay 3 billion to own the business outright? Anyone recommending stock to someone else should be able to describe in a detailed way why they are recommending it. It shouldn't be a case of "well, I like Kerry Group's cheese and butter, they taste good and I see lots of people buying them, so they're worth a punt". Similarly, when someone says -

you can't go wrong with [Kerry Group]. But don't expect to make a lot out of it.

- clearly there is an expectation from that person that "they won't make a lot". What is the basis for that assertion? There should be a quantitative basis for stating something like that. And also, what is "a lot"?

I'm not criticizing Electric Boobs, who may well know something I don't. That's not the issue.

Basically, the OP wants to buy stocks but doesn't know anything about stocks. That's actually perfectly fine. Picking individual stocks for long-term gain is really hard. The vast majority of people who want to buy stocks for prudent long-term investment should just buy a broad low-cost ETF that tracks the market.

tommylimerick · 27-08-2014 11:02am

most people in investments are motivated by fear and greed
like a coke addict the highs are high but also the lows are lows
the only thing you need is something that someone else wants more tomorrow

Recondite49 · 27-08-2014 11:27am

FURET wrote: »

Well, with regard to Kerry Group and Ryanair, why does Electric Boobs feel that they are a good investment? Has s/he studied their balance sheets, PE ratios, price to book ratios? What are the earnings per share over the past five years? Is the business currently overpriced on the market or underpriced? Is he in it for the long haul or to make a quick buck?

The unwritten rule when buying stock is that you ask yourself the question: "Would I be happy to buy the entire business for this price?"

So if for example a Kerry Group share costs 1 euro and there are a total of 3 billion shares, would you be happy to pay 3 billion to own the business outright? Anyone recommending stock to someone else should be able to describe in a detailed way why they are recommending it. It shouldn't be a case of "well, I like Kerry Group's cheese and butter, they taste good and I see lots of people buying them, so they're worth a punt". Similarly, when someone says -
- clearly there is an expectation from that person that "they won't make a lot". What is the basis for that assertion? There should be a quantitative basis for stating something like that. And also, what is "a lot"?

I'm not criticizing Electric Boobs, who may well know something I don't. That's not the issue.

Basically, the OP wants to buy stocks but doesn't know anything about stocks. That's actually perfectly fine. Picking individual stocks for long-term gain is really hard. The vast majority of people who want to buy stocks for prudent long-term investment should just buy a broad low-cost ETF that tracks the market.

I'm with you on this Furet, just re-reading "A Random Walk down wall street" - it's a sobering thought that you can count the number of investment managers who have been able to consistently beat the market on one hand.

There's also an element of time and effort to this. Of course we all could meet up three times a week, pore over broadsheets and examine companies' fundamentals, but since such a strategy is extremely unlikely to make us more than a broad index fund (we have already mentioned VUSA, VEUR and VWRL!), why not do this instead.

I think perhaps the drawback is that this advice cuts out the need to hire an investment professional, it's a rather boring, almost mechanical process of investing in index funds or bonds and it doesn't require much intelligence - there seems to be a need on the part of investors to be seen to be doing something clever maybe.

Speaking for myself I'm not touching anything outside index funds for the foreseeable future, best of luck to anyone though who wants to try to outguess the market.

Recondite49 · 27-08-2014 11:32am

tommylimerick wrote: »

most people in investments are motivated by fear and greed
like a coke addict the highs are high but also the lows are lows
the only thing you need is something that someone else wants more tomorrow

Ah, the old "greater fool" theory - it does make one wonder whether everyone who bought shares before the dot com bubble first for instance was really so naive as to think that this was a good long term investment.

No doubt there were a few cynics out there who simply bought the shares to sell them again - I suppose since every share you sell is bought by someone else, they clearly think they know something you don't.

As mentioned above, it's much less exciting to invest a small amount each month into a broad index fund and ignore the movements of the stock market. It also requires a good deal of courage as there will be years your investments will go down but as an investment strategy it's still your best chance of growing your wealth.

I'm currently doing the free MiT course in basic Financial theory. Professor Lo who delivers the lectures mentions that reading older issues of the Financial Times or Wall Street Journal is usually very instructive as if you go back say ten years, the names of the top mutual funds are different to those today - that should tell us something about people who think they can predict the directions the stock market can take !

FURET · 27-08-2014 12:11pm

Recondite49 wrote: »

There's also an element of time and effort to this. Of course we all could meet up three times a week, pore over broadsheets and examine companies' fundamentals, but since such a strategy is extremely unlikely to make us more than a broad index fund (we have already mentioned VUSA, VEUR and VWRL!), why not do this instead.

Yep. I must admit though that I am having teething problems with this based on determining the taxation implications (which one would have to deal with anyway when buying individual stocks) and also the currency implications of buying an ETF with euros whose base currency is US dollars.

I think perhaps the drawback is that this advice cuts out the need to hire an investment professional, it's a rather boring, almost mechanical process of investing in index funds or bonds and it doesn't require much intelligence - there seems to be a need on the part of investors to be seen to be doing something clever maybe.

.

This is true, but it suits me fine :-)
The one thing I would say, though, is that long-term ETF investing requires an extremely dispassionate mindset. John Bogle has said that ETFs can be a curse due their high liquidity: insufficiently detached investors see a downward trend, panic, sell, and crystalize the loss. ETFs require Vulcan-like levels of detachment...

robp · 27-08-2014 1:07pm

Recondite49 wrote: »

Ah, the old "greater fool" theory - it does make one wonder whether everyone who bought shares before the dot com bubble first for instance was really so naive as to think that this was a good long term investment.

No doubt there were a few cynics out there who simply bought the shares to sell them again - I suppose since every share you sell is bought by someone else, they clearly think they know something you don't.

As mentioned above, it's much less exciting to invest a small amount each month into a broad index fund and ignore the movements of the stock market.

I think a lot of people are attracted to ETFs but are put of by their complicated and higher taxes? Please correct if I am wrong as I am really struggling to understand ETF taxation.

FURET · 27-08-2014 1:40pm

robp wrote: »

I think a lot of people are attracted to ETFs but are put of by their complicated and higher taxes? Please correct if I am wrong as I am really struggling to understand ETF taxation.

Grappling with it now myself, but from the perspective of a domiciled ordinary resident but currently non-resident person trying to buy Irish domiciled ETFs!

Irish government policy towards investing and investors is barbaric.

Recondite49 · 27-08-2014 3:33pm

FURET wrote: »

Grappling with it now myself, but from the perspective of a domiciled ordinary resident but currently non-resident person trying to buy Irish domiciled ETFs!

Irish government policy towards investing and investors is barbaric.

You said it bro, is it really an issue at this stage though given that you're buying not selling?

Forgive my naivete but surely capital gains tax only becomes an issue when you actually liquidate your shares? I'm hoping to have left the Republic before selling!

FURET · 27-08-2014 4:32pm

Recondite49 wrote: »

You said it bro, is it really an issue at this stage though given that you're buying not selling?

Forgive my naivete but surely capital gains tax only becomes an issue when you actually liquidate your shares? I'm hoping to have left the Republic before selling!

Yes, my understanding thus far is that capital gains are only an issue when selling. But when you do sell, ensure that you are no longer ordinarily resident.

Example:
You reside in Ireland for all of 2013, 2014, and 2015.
In January 2016 you leave Ireland.
You will in fact still be considered ordinarily resident in Ireland until January 2019 and, if you sell before January 2019, regardless of where you are, you might be eligible for capital gains tax.

And that's just capital gains tax. There is also the matter of dividend taxation! If your ETF distributes dividends, my understanding is that these are also taxable. In fact, even if the ETF automatically reinvests the dividends, they are still taxable!

In general the situation is quite opaque so I feel I have to get a professional opinion, but it seems even professionals are unclear. My own ordinary residence expires in January 2016.

I certainly wouldn't sell an ETF as an Irish citizen unless I was outside the country for 3+ years and even then I'd do my due diligence.

The taxation of dividends, in my opinion, means that investors have to be extra savvy about their choice of broker in terms of choosing the most cost effective service.

I have opened a Saxo account but luckily I have not yet deposited my funds...I am starting to think that Interactive Broker is a more cost effective option.

Recondite49 · 27-08-2014 6:50pm

FURET wrote: »

Yes, my understanding thus far is that capital gains are only an issue when selling. But when you do sell, ensure that you are no longer ordinarily resident.

Example:
You reside in Ireland for all of 2013, 2014, and 2015.
In January 2016 you leave Ireland.
You will in fact still be considered ordinarily resident in Ireland until January 2019 and, if you sell before January 2019, regardless of where you are, you might be eligible for capital gains tax.

And that's just capital gains tax. There is also the matter of dividend taxation! If your ETF distributes dividends, my understanding is that these are also taxable. In fact, even if the ETF automatically reinvests the dividends, they are still taxable!

In general the situation is quite opaque so I feel I have to get a professional opinion, but it seems even professionals are unclear. My own ordinary residence expires in January 2016.

I certainly wouldn't sell an ETF as an Irish citizen unless I was outside the country for 3+ years and even then I'd do my due diligence.

The taxation of dividends, in my opinion, means that investors have to be extra savvy about their choice of broker in terms of choosing the most cost effective service.

I have opened a Saxo account but luckily I have not yet deposited my funds...I am starting to think that Interactive Broker is a more cost effective option.

Hi Furet,

Thank you once again for sharing your thoughts on this.

This is naturally very concerning, I know that in Ireland we're taxed 41% on any dividends generated, but if as you say we're taxed on those which are automatically reinvested then we are going to have issues when it comes to ETF's, particularly when it comes to capital gains in addition.

I'm mercifully originally from the Channel Islands, which are renowned for their lax tax laws so will simply move back there when the time comes to sell up.

While we can't condone tax evasion, given where you are currently, do you think that even if you're theoretically liable for tax there would be any way for the Revenue to come after you for it?

If, for instance, you had your shares transferred to a foreign broker in your current country and sold them there, would there be any way for them legally to get at the proceeds?

FURET · 27-08-2014 7:19pm

Recondite49 wrote: »

Hi Furet,

Thank you once again for sharing your thoughts on this.

This is naturally very concerning, I know that in Ireland we're taxed 41% on any dividends generated, but if as you say we're taxed on those which are automatically reinvested then we are going to have issues when it comes to ETF's, particularly when it comes to capital gains in addition.

I'm mercifully originally from the Channel Islands, which are renowned for their lax tax laws so will simply move back there when the time comes to sell up.

While we can't condone tax evasion, given where you are currently, do you think that even if you're theoretically liable for tax there would be any way for the Revenue to come after you for it?

If, for instance, you had your shares transferred to a foreign broker in your current country and sold them there, would there be any way for them legally to get at the proceeds?

Well, I'll begin my response by stating that I am in no way an authority on these matters and I am open to correction on any point I make. I am currently doing a lot of research, however.

The key to finding the answer to the dividend taxation issue is the following question, to be asked of both the ETF manager and the broker:

"When you pay me a dividend, is the dividend gross or net?"

If they say "gross" it means dividend withholding tax has not been deducted, at which point - it seems to me - it is up to the account holder to make a declaration to Revenue.
If they say "net" it means that someone has deducted the dividend tax already before distributing / reinvestment. The question for the ETF manager or broker then becomes "who did you give it to?" The answer will almost certainly be "the Irish Revenue Commissioner" or "it was withheld at source in the US (for example)".

You might then approach revenue and see if you can get anything back.

Note that I am speculating -- but the above approaches seem workable to me. Key question: "Is the dividend I receive gross or net". Everything follows from that.

The capital gains issue would be a problem for someone who has a two- or three-part portfolio and who wants to rebalance once or twice per year by selling part of the high-performer to buy more of the low-performer.

In my case, my wife is neither domiciled, nor resident, nor ordinarily resident, so she will be buying the ETFs, not me. And I will make sure to be a very, very good husband!

I want to Buy Shares.

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